RIYADH - Al-Malaz Insurance Co. has become the first of the 13 insurance companies recently licensed by the ministerial council to launch its initial public offering (IPO) tomorrow.
Mubarak Al-Khafra, the company's chairman, has announced that Al-Malaz will offer for subscription 30 million shares, or 48 percent of the company's total capital amounting to SR300 million. Other insurance companies are also expected to float 40 percent of their shares with a view to boosting liquidity into the market.
Besides the 13 insurance companies already licensed by the authorities, 18 more are still waiting for approval. Sources in the insurance market said that with many hospitals and polyclinics being established in the Kingdom, the health insurance sector is poised for a big leap forward. It is estimated that the market will be worth SR20 billion to SR30 billion within 10 years. "That's why so many insurance companies want to get into Saudi Arabia," BMG Financial Advisors Chief Executive Officer Basil M. Al-Ghalayini said.
He expects a good market response to IPOs from the insurance sector, since the shares will be floated at par value. All the 13 insurance firms have been vetted and screened by the Saudi Arabian Monetary Agency (SAMA) and the Capital Market Authority, assuring a high degree of credibility.
Moreover, all the insurance products are Shariah-compliant, extending their reach into a large segment of the society.
Al-Ghalayini further said that MedGulf, a major insurance company capitalized at SR800 million, will go public on Feb.17, while 13 other IPOs from this sector will be floated for public subscription by the end of this year. Together, they are expected to inject SR2.6 billion into the market, of which SR936 million will be channeled in IPOs.
Asked how he anticipates the market response to the insurance sector, he said IPOs from this sector would be different for the foregoing reasons. Besides, the mandatory health insurance policy for expatriates is giving a big boost to the market, which has experienced rapid growth in terms of expansion of existing medical facilities or addition of new ones. A spin-off from the surge in healthcare facilities is the expansion of the pharmaceutical industry in the Kingdom.
A report from the Gulf Organization for Industry Consulting noted that Saudi Arabia tops the list of GCC countries in the number of pharmaceutical factories (27) and the volume of investment in the industry ($619 million).
The Kingdom's nearest rival is the UAE which has eight factories valued at $64.2 million.
By Javid Hassan
© Arab News 2007
